francine: china leaders gather. eakening growth. global rally driven by better than expected u.s. data. urope weighs in. a warning of a brexit. this is bloomberg's "surveillance". i'm francine lacqua here in new york with tom keene. we talk politics and china and negative rates.

tom: a swing back to rates and what we're looking at. you're aware the united states has a jobs report tomorrow. we call it super friday. francine: only the most important piece of economic data probably in the world apart from china if we see a slowdown. a little bit of news from retail sales. the e.c.b. is meeting march 10. increasing some 2%. put that against the weaker than expected inflation and some pretty dire economic service data from the u.k.. tom: the german yields, we will get to that and a data check as well. >> north korea has shown what it thinks about the new united nations sanctions. hours after the security council approved more sanctions to punish the country for a nuclear test and a robert launch, north korea was at it again. it test fired short range projectiles into the ocean.

investigators are examining debris they suspect came from that missing malaysian jetliner found in mozambique. a person familiar with the investigation says it appears to be part of a tail from a boeing 257. the plane disappeared almost two years ago. the heads of the british conservative party will square ff over the e.u. referendum. johnson wants to u.k. to leave the e.u. osborne wants to stay. the bbc will blast the event. considering a is whether nominate an appeals judge to the supreme court. republicans have vowed not to hear confirmation hearings.

it may put pressure on charles grassly. he spoke fondly of kelly before the senate confirmed her to her current position. stepping up the campaign against donald trump. mitt romney will make his case as to why trump shouldn't be the nominee. romney has been critical of trump for months and trump has eturned the criticism. tom? tom: thank you so much. we go on to michigan and florida. now we have data to get you ready for the jobs report tomorrow. futures churning. a 10-year yield. a different yield than a week ago. 1.85%. on the next screen, a big howing of complacency.

the first leg down away from that the two-decade average. it sort of feels like dow 17,000 but we're not there yet. the yen weak over the next few days. francine: this is a picture for european stocks. we had a rally over the last five days. down to 0.2%. i wanted to mention the sterling. starting to talk about fierce of a brexit starting to play out on the markets. we have this services gauge. the most in quite a while. eople are concerned. tom: let's look at oil today. we'll focus on that in our next hour. brent crude. $100 a barrel. what is important is these are classic 250-day.

imagine francine going like that. what would you do with oil there? a lot of people ask that question, but we didn't get through. it is a classic kiss. down we go again. we're so far from where we need to be to get through to a bull market in oil. francine: when you look at the level, let's remind ourselves where it is 36.7. the impact would be huge. tom: we're about 43-45 dollars to get to any kind of breach of that 200-day moving average. francine: our guest host for the hour is global market strategist michael purvis. so nice to see you. when you look at market turmoil what is the main driver? how important is this jobs data because we need to understand

the direction of what the fed is doing and how does janet yellen look at global data and compare it to the market globally? >> there is a great tension as it relates to the fed. when you go back and look at this surprise equity rally, i don't think it is a coincidence at it coincided with the softening of the dollar that started in late january and accelerated until very recently. what is really happening there is that negative that got reinforced by the japanese in late january along with some of the global deflationary pictures nudged the fed into this more dovish stance and the market's perception of that. you see expectations for a march hike went from 50% to basically zero in three weeks. the tension that is building is does the global paradigm trump

-- let's say we get a great jobs number tomorrow. normally that would put upward pressure on yields and the dollar which even though it is good news economically would put downward pressure on equities. i think the global stuff if is trumping some of the -- pun hat was a purves there. today we got distracted by olitics and super tuesday. michael: i think some of the acceleration and equities is happening faster than i expected. thought we would be choppier. it doesn't mean we're out of the woods. i think we probably still burst through the upside another 50-70 points. there is a lot of things.

there is a lot of technical damage in crude and equities. i think some of the equities are starting to get ahead of this -- of the oil. what i mean by that is i think they are starting to -- equities are starting to almost smell but the crude is starting a lobotomy process. tom: it is a cushing chart. i never show this. you can get anything off of bloomberg. it is spectacular. the thing that is critical there is the extension over that long-term regression. we are up to our eyeballs. francine: actually, if you make -- now you have the oklahoma stock. this is exactly the problem that opec countries face. not russia and saudi, it is russia and saudi against

tankers and oil. michael: that is going to be coming down a little bit. inventory estimates have been just sort of striking. i think what is interesting though is that crude prices against those charts have not been crashing down and going further south which i think is a little bit of a signal that the short game in oil is starting to come to an end. at should be -- those should -- normally super short oil but between positioning and between probably there is -- drillers see that chart too. it ultimately, you know, at some point when that inventory gets to 100% -- francine: are we underestimating the lack of liquidity in the markets and the impacts it could have on the banks? energy and also negative rates? michael: let me try to take

that question one by one. as it relates to energy, i'm sure that is the big thing. jpmorgan was out a few days ago. they have ample equity to cover their energy book and all of that kind of stuff. i think the market has been processing that in. the high yields market. it is very processed. francine: thank you so much. next, michael purves there. china stocks. can the moment continue? we speak with hsbc's greater china economist. he is john fu coming up here on "surveillance."

francine: i'm francine lacqua,

tom keene, both in new york. >> the pressure on e.c.b. president mario draghi to increase stimulus this month. pressures increased in february. prices across manufacturing and services fell below a key level. weaker oil prices have pushed the region's inflation rate below zero. exxon mobil sees no rebound in oil prices any time soon. they are scaling back production budgets. cap dal spending will -- capital spending will fall about 25% this year. china's antecorruption rackdown is affecting macau. it is only chinese city where gambling is legal. francine? francine: thank you so much. after tocks fell

measures to boost growth. we're joined by hsbc's economist. john, great to have you on the program. when you look at g.d.p. in china, it is not looking great. are we expecting more from the pboc and are you concerned about a policy mistake? john: i think we are expecting more from the pboc and fiscal policy. we see more cuts in interest rates is likely. the focus is shifting toward government spending and investment. that really will give you a much more direct boost in aggregate demand. francine: something -- i read a lot of research notes on china and something that comes up again and again is at the end of the day, the pboc will have

to do what janet yellen did. zero bound interest rates and a lot of q.e. is there any truth in that? john: i think china is not quite at that level. you have to remember they still have -- to act on fiscal policy. i don't think china necessarily eeds to be so austere. if the problem is a lack of demand and expectations at some stage, the only sector that may be left to spend would be the government sector and that is fairly standard in any economy. you have to have fiscal policy to bring expectations and activity back up. tom: john, i want to talk about chronic and the idea to have mathematics of it and the behavior of it in china. bring up the chart. this is china g.d.p. with a moving average and we have

never been here is what you need to know in modern history. our moving average is below 2000 t was in the early slowdown. there is a chronic stones the slowdown. what does that -- sense to the slowdown. what does that chronic tone government? john: i think it is a risk. you're already seeing nominal g.d.p. fall and deflate and going negative. in some ways the economy is already in deflation. not good for companies who are heavily indebted. further along the line, the risk must be to the labor market and consumer confidence and household consumption. francine: we heard the g-20 was five days ago. do you believe the chinese authorities are when they say they will not devalue one on a

purpose-basis? john: i don't think china has that much to gain from a devaluation. it is not driven by exports anymore. in terms of how much bang for your buck you get from policy, you get far more from policies -- d at boosting domestic especially when global trade is weak. tom: thank you so much. he is with hsbc in china. michael purves with us. we're going to talk about the other asian nations today. everybody is calling for a depreciation. what are they waiting for? michael: it is interesting. lieu look at everyone's focus on the crude correlations.

it is also almost tick for tick with those two as well. from a trading point of view this is one of those orrelations you want to see. on the issue as to whether more devaluations are really going to send the vicks back up into the 40's, i would suggest no. i think the question we get to is how does any further devaluations get processed? if it is part of a thoughtful solution. francine: what i'm trying to understand is whether they will devalue because they have no choice and they are just not telling us or this is deceitful, they want to devalue but not tell the world right now. michael: right. i don't know if we'll ever know the answer to that question. i will suggest this. think they are -- there are

plenty of reasonable arguments for them to devalue. john made this point about not -- wouldn't be their q.e. -type stimulus. i think there is an interesting question you have to ask. given the substantial amount of debt, i think it is about $23 trillion between corporate and government debt in china. 280% of g.d.p. a year ago which is a lot for an emerging market. how do they get through a deleveraging process? how do they handle some prob problem loans. they have corporate dead that is in nonchinese currency terms. having said all of that, the concept of them going to q.e. , to manage this deleveraging seems to me a more probable thing. if that is done in concert with a devaluation, that may not be as bad for market sentments over here as you might think.

francine: thank you so much. coming up later in the hour, we speak with the czech national bank governor. we'll talk negative rates and the impact on czech banks.

tom: it is super thursday before jobs day. we have been political. we'll be political as we go to michigan and florida as well. governor romney is speaking today. hat will be interesting.

hammad alarian is a ulls writing -- always writing. patient capital is less available. markets about the collateral damage and the unintended consequences. who el purves is with what is an expert on liquidity measures. to me it is extraordinary how we talk about it but nobody can get their fingers on it. michael: it is substantial, right? between if e.c.b. and the b.o.j. we're talking well north of what we did at the height of q.e. 3. that's -- you know, we'll see what get next week from draghi. a reasonable assumption to think that is going to continue

and see great volatility over here. tom: take it over with an i.s.l. and curve. what is -- the financial engineering mumbo jumbo. what does it mean for the real economy michael: nom the nominal rate gain going more orthodox over the last year really. it really remains to be seen. i think it is going to have -- it certainly raises a lot of agrees bankers for what happened to the interest margins. in theory it should work. it should drive the risk curve and lending and credit growth has been a key part of -- a key sort of burden on this economy, many economies. francine: it is not as simple as getting a higher flow figure. we need to make sure that it is inclusive growth and genuine

financial stability growth. michael: i think the question that he is getting at a little bit is what kind of efficacy is he getting at? francine: thank you so much. michael purves. coming up, showdown over brexit . we will get the impacts on the banks. what does it mean for drafting contracts? a lot of people say it will probably be the lawyers that benefit the banks that lose the most. speaking to british business asking them, urging them to stay in the e.u. ♪

tom: good morning, everyone. this is bloomberg "surveillance." together again. we were gone for weeks.

she wouldn't let me come back until -- strength pped. it finally did. right now to our first word news, here is nejra. nejra: fighting for his olitical survival. kenny has opened the door for a grand alliance. atlantic state is making millions by speculating in currency markets according to testimony in the british parliament. the atlantic state is expected to make up to $20 million a month by taking dallas and funneling them into legitimate foreign exchange markets in the middle east. a new development in the investigation of hillary clinton's emails while she was secretary of state. immunity has been granted to

hillary clinton the person who worked on her former email server. republican presidential account ben carson says he doesn't see any political path forward for his campaign. he had a poor showing on super tuesday. he is skipping tonight's debate and will speak about his campaign tomorrow in washington. republicans lining up to stop donald trump from becoming the party's presidential nomneesm the latest, 60 republicans have written an open letter saying he is dishonest and his vision of american power is inconsistent. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. francine: france's economy minister has issued his toughest warning yet. germany's finance minister is in london to tell the u.k. to stay in.

joining us now to discuss the implication of a brexit and how other european countries should maneuvering themselves into persuading the u.k. to stay in, john joins us. great to have you on the program. just remind us what the u.k. polls are telling us about where people stand on the issue. >> if you look at the polls they are pretty much still all over the place at the moment. there is one batch of polls that has a narrow lead for the leeds camp but other batches show there is actually a very strong lead for the camp that says that the u.k. should stay in. when we're looking at this poll, this also applies i guess in the u.s. as well. there is a big difference between internet polling and phone polling. the phone polls tend to track

less commitmented voters. they tend to show a lead that the u.k. should stay in the european union. the internet polling which tends to capture more committed voters, people more committed to their respective causes, that tends to show a lead for the leave camp. francine: looking at the polls and what people are worried about, it should probably be what the u.k. economically would look like outside of the e.u. it looks like a lot of the talk is on snchity. >> the london chattering classes and political class there is a lot of talk about sovereignity. i guess the question is how much does your average voter and the rest of the u.k. actually care that much about it. for them, the issues are about the economy and also immigration. actually very interesting to look today at an open letter

written by a group of small businesses. they are actually coming up and saying -- for brexit. the city establishment, the big business establishment based in london is calling for the u.k. to stay in if you look at the smaller companies who are the backbone of the u.k.'s deme a lot of ways, there is more of a feeling that they would be best served by britain leaving the e.u. given their concerns about excessive regulation. tom: you brilliantly captured that. lord rhodes i believe is leading the establishment on this issue. how coalesced is the establishment around this issue and i sort of do that with a backdrop of governor romney speaking in united states today. is everybody in the lead? are they all on the same page? >> pretty much so, yes. there is a feeling they don't want to repeat the mistakes that have been made with the

scottish referendum. so there certainly is a much more concerted campaign this time. as francine mentioned the french economy minister earlier, he gave an interview where he was kind of laying out not quite apocalyptic but a negative scenario for the u.k. if they left the union. politicians from the rest of the european union engaging in a god cop, bad cop routine with david cameron. tom: i find this absolutely bizarre. i'm trying to understand the canadian finance minister or the president of mexico telling washington what to do. francine: right. europe was conceived but never became the state of integration that you have here. it is not federal.

in, is if they stay boris johnson going to turn around and -- the french are desperate because they need us and we don't need them. >> you mean, could it backfire? francine: yes. >> there is always that possibility. certainly that is the -- the exit camp will be deploying a lot over the next four months. they will say don't listen to anyone in paris or berlin. this is a question of british sovereignity. there is a risk that could backfire on cameron. tom: thank you so much in london. michael pur vench s with us. it is such a backdrop, we're removed from the whole brexit debate but carney can't ignore this. michael: we're not removed from it. if you look at the vix curve, it is interesting.

tom: called the vixit? michael: we never have a vixit. the futures curve dips right after that. in other words the market is starting to factor this in. francine: michael has a very good point. we don't know the consequences of a shock in the financial system globally. if this ends now, up being a coin toss. i think the market is going to really have to process this. that on top of u.s. presidential politics. there is a lot of wild cards in mix. tom: super tuesday, we don't look at the returns. we look at london. francine lacqua will translate. this is who? mr. corbin? francine: he is the opposition. he was nominated after the implosion of -- tom: is that the look?

francine: he is quite left wing. he is quite relaxed. he got a lot of comments when he showed up like that at the house of commons. this is -- he is not a very strong opposition leader. let's put it that way. that means it could have an impact on the brexit debate. he is talking there. they are talking brexit. tom: help us here on mr. corbyn. he is no gordon brown or tony blair. how does he fit in to the american comparison? francine: to the left of bernie sanders. coming up next, we'll talk negative rates. we speak the czech bank governor. that is coming up next. ♪

francine: i'm francine lacqua, tom keene here in new york. let's talk negative rates. you have a great interview coming up with a central bank governor. it is a bit tricky being a central bank governor at the moment. >> yeah, it is. what is interesting here, fran, is that a couple of days ago we spoke to the bank's boss about negative rates. listen to what he had to say. >> we have probably about 30% of the deposit of the czech republic and when you talk about low income people, we probably have half of the population has their savings with us. if we pass on negative rates to half of the population to the czech republic, it is just not doable. it is a real issue for us.

guy: he joins me now. what is your response the that? >> -- to that? rates, we had a of d, we are sort of -- negative interest rates, some exposures to -- but the policy, we are not so sure how well we know the consequences of this policy and there are still g her options through keepin intervening we are increasing the amount of money. i'm not so sure how this consideration is for us. guy: if mario draghi decides to

go further into interest rates. will you consider a policy option? >> the basic division is that we are keeping the exchange rate -- and we are committed to keep it at least until the end of the year which means no matter what we do, if markets find the differential attractive, we will be increasing the amount of money n the economy as additional -- i'm -- we have discussed it. we have not reached a conclusion. it may be that we may not be able to different that much in some segments from e.c.b. but we will have to wait and see. we will wait for mario and see what he is going to do and we will see what the markets are going to do and then we will discuss it. this is our way of doing

things. we are not in a hurry to react. guy: you're not convinced about negative rates? are you in the mark carney camp? >> a bit, yeah. just trying to use, i got the exchange rate as a sort of stabilized -- to just keep it, exchange rates general. do not do anything with monetary conditions inside is not the best way to go. that side for sure. negative interest rates, they hardly work through the expectations. there is always a lower bond the rankly to increase rate, it is not going to impress the markets in terms of expectations about what -- what the monetary conditions are

going to be a year from now opposed to anything like q.e. or -- intervention on the relaxation side. we can do whatever we want in terms of volume, these conditions. it is influencing the expectations much more. guy: picking up and extending it further, talking about expectations and your level of understanding. i look at how the story has worked in japan. a lot of volatility in the banking stocks. do we have a grip on that yet? >> i believe that is some of my colleagues' point of view. opposed to other things. e already have experience. don't exactly know what is

going to happen. as i said, if they are -- carefully for a limited period of time, they influence only the -- of the market, ok, fine. as long as they get to the -- we want to decrease -- this was mark carney's point. on the other hand we do not know what are the other consequences. so i think that there are other -- to be used as well. also the monetary policy cannot do the job of increasing the demand in currency. to some economists. i'm not talking too much about how i think we are doing. we cannot expect everything -- guy: we'll leave it there. the governor of the central bank to have czech republic.

thank you very much indeed. francine: we're looking at the impact on a lot of these bond yields before the e.c.b. meets. heiner on herbert the state of retail at 7: 30 a.m. in new york, 12: 30 p.m. in london. ♪

tom: good economic warning, everyone. tomorrow jobs day. we'll give you full coverage beginning early in the morning as we move to 8: 30 across bloomberg radio and television. on this thursday, our bloomberg business flash, here is nejra. nejra: goldman sachs will probably join the list of u.s. banks who have agreed not to sell russian debt. the obama administration has urged wall street to stay away from any russian bond sale saying it countered the u.s. foreign policy. uber has a pilot program for india. they will offer motorcycle and scooter service. it will begin in their technology center. rides will start at 22 cents.

at least eight u.s. airlines have asked permission to begin scheduled flights to cuba. havana is the most popular destination. currently all flights between the u.s. and cuba are chartered. francine? francine: here is what we're watching for the rest of the week. the german finance minister will bring his anti-brexit aurkt argument to the im-- argument to the chamber of commerce in england. later today we'll be speaking at the official monetary and financial institutions forum at the school of economics. the u.s. labor department releases its unemployment data tomorrow. the planning committee for the chinese communist party has its annual planning session. tom, there is a lot of risks out there. tom: mibling purves has said

through the hour, there is a coordinated mix here as we recalibrate as we begin march. let's begin with one of michael's great theories that he has been right on weak asia currencies. this is the bundled basket. there is the purves curve on the right. with the dollar index weakening. on the right, the financial crisis on 1997. i'm sorry, michael, we are etting to a distressing level. what does it signal to see this depreciation? michael: to my mind it is a bit of a metaphor for all that is problematic in china and that basket picks up a lot of other currencies that has some exposure to china as well. in some ways, it is a much more helpful indicator than the chinese stock market that is more coupled from the macro conditions in china. new here is a tangible

question about where the dollar hits. michael: you can look at currency baskets as well that have a similar chart as well. 4 this raises questions for u.s. -- this raises questions for u.s. equity investors and risk investors as to what type of tail risks are presented by in this is going to be that much more further macro pressures on countries like brazil and all that and does that drive a risk off later on in the year? francine: where is the next shock going to come from? this is cyclical. where is it coming from and can monetary policy combat its or preempt it? michael: let me take the last part of your question first. if you look at -- one of the charts i love, look at the collective balance, bank of apan, e.c.b., the fed, the vix, that line goes inversely

with that, very consistently until last august. then that model broke down. it broke down because there is bank int issues that no would address. one is oil, saudi focused and the second is china. tom: what is the new -- model? michael: the pboc, whether it baves a lot more like a developed market central bank and whether it does some q.e. and if they can create some fiscal monetary solution to this very complicated circle they are trying square, that will help that chart thomas is referencing. francine: we also need to give china and pboc a little bit of leeway because they are in the spotlight and it is a maturing economy. michael: it shouldn't be too much of a surprise that we have gone from 10% to 8% to sub7%. the question of nominal g.d.p.

going from 20 down to 8 is a bigger swing factor. their inflation statistics are at or lower than a lot of the available market -- tom: bring up the chart again. i want to show you this tension. francine doesn't remember this. she is too young. the instability. citigroup said we need instability. we haven't seen it yet. you're a bull in the eggity markets. are you investing in assuming stability and we don't get what is left on that chart? michael: i'm a conventional bull. china is able to cobble together some monetary fiscal response to their problems. i think they have a reasonable chance of doing. will they slow down? cre. we're not talking should i get long chinese equities? om: it is a roubini -- that is the number one question gets. is it 2008?

michael: i don't think so , as it relates to china. they have substantial reserves. they are leveraging. again, they also have a play book and a textbook about how to deal with deleveraging. take a look at our textbook and implement that. china inc., you can fire bazooka bullets quickly and aggressively with the right bullets. tom: richard will be with us from pimco. looking forward to speaking to him after our conversation with alan greenspan. skip york, it has been too long. one of our most popular guests on oil. skip york. another hour of bloomberg "surveillance." ♪

tom: throw the year-end

predictions out the window as the job predictions back in. ta of pimco will be with us. good morning, this is "bloomberg surveillance." it's thursday, march 3. did you survive super tuesday? francine: i did and now i'm looking at brexit? . its different than every other political race. it's very true of what we see in europe. tom: it's very cool you had a different view on the ballet of tuesday night. onto michigan and florida. we go to london with our news.

>> hours after the security council approve more sanctions to punish the country for a nuclear test in a rocket launch, north korea fired back by firing off short range missiles into the indian ocean. the two most likely successors to david cameron will square off over the eu referendum. two days before the vote in june, a debate will pit boris johnson against chancellor and o of the exchequer. be in audience of 12000 and the bbc will broadcast the event. consideringama is whether to nominate a federal appeals judge in iowa to the supreme court. the fbi is conducting a background check on judge jane kelly republicans have vowed not to hold confirmation hearings but nominating her may put pressure on charles grassley.

the republican establishment is stepping up its campaign against presidential front runner donald trump. former presidential candidate mitt romney will make his case why donald trump should not be the nominee. in prepared remarks, he said donald trump is a phony, abroad broad and his promises are is worthless as a degree from trump university and is domestic lcs would lead to recession and his foreign policies would make america and the world less safe. trump says romney ran a terrible campaign four years ago. there is a republican debate tonight in detroit. global news 24 hours per day for more than 150 news bureaus around the world. tom: nicely reported, that was well done, capturing the tone of governor romney of massachusetts. he's got a little bit of that western edge to him from his utah days.

i heard it in those comments. francine: i don't know if we understand what that means in europe. at donald trump from europe but is there a chance that this will split the republican party? tom: there is no question about that. francine: will they divide? tom: we saw this in washington with vin weber. the divide is there as you state but the question is, now what? there is no time to get to michigan and then to florida. after florida, the whole thing could be decided so it's an extraordinary day. we will have coverage through the day of governor romney's comments. right now we have a dated check in we are in jobs day mode. littlerude oil shows a

of act timid to. vix is showing some complacency. european stocks lost a little bit of steam but they are pretty much flat area this is the pound because there is an important speech by the german finance minister in london urging them to stay in the eu. we need to do a pound check daily. tom: you are going home? francine: i will come back. tom: we will revisit this. brent oil comes down. what would you have done their with $60 in the bid. we will talk about this in the hour. oil rolls over and it's miles from the breakout of the 200 day moving average. francine: i have seen a little

bit of research. we underestimate the power that southern wealth funds from the middle east impact world markets. tom: we can do this? francine: they just pulled money of a lot of these indices. that's why they are so correlated. tom: we have guests from a different planet. ishard clarita from pimco with us on monetary policy with a wonderful overlay of academics of europe. rk gives us his totally twisted view and oil. as we go into the march 16 fed meeting, is there a fence of stability or instability within our global economics? >> i think the world looks more stable today than it did five or six weeks ago. january, 2016 was turbulent.

it's not so much because of the fundamental data that markets i college he was impacted by concerns about china and the volatility of oil markets. if we find a autumn in oil, then we -- if we find a bottom in oil, then we get perhaps some stability. of oilthin that question and turbulence, do you put the within alan greenspan's age or euro or can it be a short-term challenge? >> i think we are in an age of turbulence. the middle east is certainly quite confusing and dangerous. age of think the turbulence diminishes but investor site elegy can be moving back and forth. datank you see that in the but more from concerns about policy in china and the lack of

understanding in oil markets. francine: the fundamentals have not changed. to be less concerned about world growth but nothing has changed. >> the global macro do data is on the path that we and others expected three months ago. look at the oil markets, opec lost control, who is running things now? >> i think it's the demand curve. do we need,h oil how much demand growth is there actually out there. it goes back to the issue of a lot of uncertainty about the strength of china and as china goes, the emerging world goes. the vast majority of production has operating costs below $25 per barrel. change thenybody price. i'm making money on every barrel so why would a change the price. tom: it's a pleasure to talk

to someone who has oil rigs on his tie. >> this is from a tie called paris, texas and these are the pumps that after you drill the well, this is what gets oil out of the ground. demanden i look at the responsiveness, is it new technology and a new era ores of the same demand curve it was in midland, texas 30 years ago? , it's the classic we have not figured out a way to get liquid fuel out of the transportation mix. but we are more fuel efficient than we were and we see alternative vehicles coming up but they are a small part of the alien vehicles. can officials trust your oil predictions? how squishy is the oil analysis

that janet yellen is using? >> the big challenges on the upstream side. tight oil phenomenon is only five years old. it seems like it's been around for a long time but that technology spurted out from nowhere. there were few people who really l oil couldt tida be as pervasive as it is. francine: the charts correlate the major indices. can you correlated to the s&p 500? tom: i can't. is it because the links to sovereign wealth money or concern about global growth? thinksimply because they central banks cannot fix deflation? >> i think it's all of the above. there is a demand component. going backhat chart

40 years and if you go back to the 80's and 90's, that correlation is positive half of the time. it depends on the shock. if it's a supply shock, you would think a low oil would be good for the global economy and vice versa. obviously, there is a demand component here. there is also technical factors involving the sovereign wealth funds as well. the markets are telling us that it believes a big part of the oil story is a demand side as well as the supply bounty. tom: you know the central banks in shock against market assumptions, are we preparing ourselves for a march shock from the federal reserve? hike in were to get a march, it would be a shock so the simple answer is no, we in the market are not prepared for that. was on capitol hill a couple of weeks ago. fed officials have had ample opportunity to float those trial

balloon so i would be shocked if we had a rate hike in march. tom: we will dive into oil and the oil dynamics in a moment. tomorrow is super friday. an important jobs report. ubs will join us and then a great academic from northwestern, robert gordon with his controversial look on the american economy. alan krueger from princeton university will join us. and they bond investor, a stamp or bill gross will wander by. that's tomorrow on jobs day. ♪

york in: we are in new our top economy and finance at markets but let's get straight to the bloomberg business place -- flash. >> sales may rise at the fastest pace in five years, the german sporting-goods maker says sales of shoes and clothing will be european soccer championships this summer but higher purchasing costs in asia will cut into margins. we will talk with a c eo of ideas at 7:30 a.m. new york time. exxon mobil sees no rebound in oil prices anytime soon. they are scaling back reduction targets and says drilling budgets will continue to be cut. the ceo told investors that capital spending will fall about 25% this year. police in oklahoma city say it's too early to tell if the death of a one-time oil billionaire

was intentional. carorities say he drove his into a bridge embankment at a high rate of speed and it came one day after he was charged with rigging bids for oil and gas leases. he was 56 years old. tom: thank you so much. coming back from washington, distressing news. last nightne at dca and the guy across for me had that texas aggie ring. tell us about the analysis and study that will be done about transactions and banking and busted deals. talk about the engineering he helped spur. >> i hope his legacy is that people remember that the tidal oil and shale oil, he was one of the big believers. in the early days it was aubrey, harold hamm and george mitchell. they believed you could take a

well and bend it horizontally and produce for a long time. >> mr. pickens had a comment last night. within that is the eye he is, can the industry he invented make money and make a proper balance sheet return going forward? is that feasible? >> it's feasible but not for everybody. was here iny that 2014 is here today and not everybody here will be here in 2018. the ones that remain will be able to make a viable business of it. 2015 has forced them. tom: let's get your perspective on the state of our hydrocarbons. let's bring out the cushing charge. -- chart. this surprises you every day. i have in here 42 years.

oklahoma is a state north of texas. their football is better than texas a and them. francine: they have great charts. tom: bring it up again. we are up to our eyeballs in oil. how does that change? we are up to our eyeballs in cushing. thosee are missing in charts is there is about 250 million barrels of storage in the u.s. alone. we can build a little bit longer. we can push the crude oil into products and store it there. it's a waiting game. as long as demand growth stays healthy and we think it will, non-opec production is turning over and that's what rebalance is the market. it the non-opec production barrels coming off-line. eventually, we have to pull low storage barrels out to satisfy demand.

we don't think that happens until later this year for 2017. this year looks to be a flat and rocky year. we could see several swings. francine: if you look at 2016, till we called bottom on oil -- until we call bottom on oil and possible defaults or shocks coming from the energy sector, is that your main concern? is that why we see not enough liquidity in the markets? >> i think it's a combination, oil and energy is one actor but i also think the concern and confusion about chinese policy trajectory is up there as well. the are related because china slowdown has impacted commodities. of: help us with the phrase vote markets clear." "markets clear."

explain how the oil market will clear. quote paul mcauley. don't clear this when they are fair, they clear when they are cheap. i distinguish between the and thein oil uncertainty to where the bottom is. once we find the bottom, you cut us the left tale of their further to go on the downside and that will be stabilizing. tom: that was a good explanation. we will continue this dialogue on economics and the nation's future. dalio will be coming up at the 9:00 hour. ♪

tom: i have ignored the herbalife story. this is breaking new from herbalife. it has been a soap opera and a just got serious. they are aggressively adapting accounting and unit count data. there are so many headlines. a major earnings adjustment even though consolidated financials are not adjusted, they move microscopically from 17 to 16%.

the unit count is stunning. francine: this comes about seven they were we thought a step closer to resolving this long-standing dispute over whether it's a pyramid scheme. this looks like a major adjustment. the stock is moving after recent surge up. this is the first day i have said that bill act and has had a rough couple of weeks. ackman has had a rough couple of weeks. francine: 4.6% lower. we will delve more into this. it's time for my morning must-read and i picked some eying from project syndicates.

policymakersly, have been putting too much burden on central banks going back at least seven years. ofare in a period diminishing returns. not negative returns but the most telling example was the adverse market reaction we got to the surprise japanese announcement that they are joining the negative rates club. though negative rates are a modest part of their policy, that announcement backfired. they wanted the yen to weaken and its strength and wanted stocks to go up and they went down. indication that perhaps we are in a territory of

diminishing or negative returns to experimental policy, it was bad. francine: the biggest policy risk comes from where? without question, the biggest policy risk is in china right now. i don't view the fed as a source of policy risk because they will a depth globally. tomorrow, jobs day and alan krueger in the a's :00 hour and bill gross will join us. we go beneath the headline dates at 8:30 a.m. on the american labor economy. herbalife is in search of a did and the bit is now at $53.02. ♪

tom: if you are bored by herbalife, shocking headlines this morning. the stock price shows it.

it's down smartly even though we got a last trade of $53.02. the older consolidated financials seem to be ok but there are new doubts about earnings, in particular about unit count. they dramatically adjust their x-chinaunt reporting e and with china and those headlines will come out this morning. there we are. let's go to our news. n ireland, the prime minister is fighting for his political survivor. his coalition was rousted in the election last week. he will leave as leader of the party within four months. he has opened the door for grand alliance with his traditional rival. the islamic state is making millions by speculating and

currency markets according to testimony in a british parliament. it is said to make up to $20 million per month by taking dollars looted from iraq eubanks and funneling them into legitimate foreign exchange markets in the middle east. in the investigation into hillary clinton's e-mails while she was secretary of state, the justice department has granted immunity for the former staff member worked on her private e-mail server. investigators want to know if classified information was mishandled. big-name republicans are lining up to stop donald trump from becoming the party's presidential nominee. 60 republicans with experience in national security have written an open letter saying trump is dishonest and his vision of american power is wildly inconsistent. among those who signed on our former home security secretary michael chertoff. romney will deliver a speech later today to make his case why trump should not view the nominee. that will be ahead of tonight's

republican debate in detroit. news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. tom: thank you so much, futures are up and what we turn to super wednesday with the chief u.s. economist. about the market dynamics as we go to friday. how board at my? >> you should not be bored because we are seeing a turning of the tide in the financial markets. you look back a month ago and the markets were saying no rate hike this year and probably nothing going into next year. retailg with the january sales report, things began to change as the markets are reassessing the u.s. economy prospects and seeing an economy that's muddling through and that depends on the job report. tom: i could not get an answer from alan greenspan.

how do you dovetail the jobs report into productivity data? how can you bring it over to unit labor costs? >> you tie them together because productivity growth was low in the fourth quarter and that might get softened -- improved and the sting will be softened in the revisions to the court numbers. thank goodness for the low productivity numbers in the fourth quarter. , thee economy was stalling labor market should have been slowing as well. because of low productivity come the jobs numbers held up. you are like an aerospace engineer. he is fired up. francine: we kne need to make sure this is coupled with strong wages and participation rates. the domestic employment they gear needs to counteract the turmoil we are seeing elsewhere in the world. right, we don't want low

productivity forever but in the short run, low product 70 growth means we could see decent job gains even though the economy as temporarily stumbled. it is finally all coming together. we are crossing through neutral unemployment and that's creating wage pressures. it's not a big flare up in inflation but it's starting to create more wage pressures and that's critical because the u.s. looks very different than everywhere else in the world. we are seeing wage pressures and that gives the fuel to consumers to carry the ball for the next leg of the expansion. francine: wage growth is ifficult to filter through people are worried about the world economy. >> we are seeing increasing evidence of skilled labor shortages. there is not a shortage of labor, there is a shortage of labor at the price you are offering. if you offer a higher paycheck,

the workers will show up. that will be the story in 2016 as we see increasing shortages satisfied by higher wages. francine: you are janet yellen and looking at this picture and looking at the risks from china, what's your next move? >> the next move in march is to do nothing. she will have a press conference and have ample opportunity to lay out the committee's framework for looking ahead. i suspect the message of the next fed meeting will be along the lines of the year got off to an uncertain start with global developments in the underlying fundamentals and she will cite , average hourly earnings are often that something the fed will cite as reasons to be confidence about the outlook. tom: i want to continue this discussion on jobs. the herbalife story is stunning.

the single line that gets me says the management says it did not find their errors in unit count because management had limited visibility into its rate of change. i have never seen that. francine: herbalife has gone through four years of difficulties. one inkman was the first 2012 saying he is shorting the company. last week, we thought we were closer to the end of this. tom: we can see the opening market with light trading. 53 and we have fallen beneath that. 48-51, herbalife yet to find a bid a.

tomorrow we will have the jobs report. tomorrow we will get perspective on the american labor economy and michigan and florida are coming in. drew matus will join us and robert gordon. we will move on to alan krueger and bill gross, stay with us. ♪

tom: it has been a soap opera back-and-forth but herbalife is morning with shocking news on unit count. any number of headlines to talk about. for those of you who are long/short is herbalife. rarely describes the bid ask.

had data errors. this is an accounting issue. we will have more on this this morning. let's go to our first word news. >> the canadian prime minister has a message for the rest of the world -- let government spending do the work. he is urging global leaders to rely less on monetary policy to increase economic growth. he is preparing a budget that will push canada. new pressure on ecb president mario draghi. that pricesnd across manufacturing and a key level. below weaker oil prices have pushed the euro region inflation rate low zero.

goldman sachs will probably join the list of u.s. banks who have agreed not to sell russian debt. the obama administration has urged wall street to stay away from any russian bond sale saying it's counter to u.s. foreign policy. that is the bloomberg business flash. tom: time for our single best charge. skip yorke and richard clarida are here. it's the old two-year yield and the belief we will escape the red circle and then down we go with disappointment. andove higher in the yield recent disappointment with the remarkable returns to a center tendency. is the fed happy with where the markets are now? markets under estimate the number of hikes the fed thinks it will put in place.

we have had a disconnect for a long time. believe thedo not fed's blue. take off chair directory. is somewherenumber in between. we don't think they will height four times but we think they will hike more than zero. francine: there is some kind of rainbow at the end of this charge. are we mispricing this worldwide? part of what goes on in the u.s. sovereign market with treasuries as the gold standard, uncertainty about global development creates a bid for treasuries and pushes those yield below where the fed thinks it makes sense. that will be weather is for the foreseeable future.

what's not on that chart is where the two-year yield wise. if it was ever to come back, to you know where your risk free rate is? does the bond malka -- market help anybody in a questionable future? >> i struggle to see the that we know where that number is now. that will be one of the big uncertainties. tom: what does exxon do? >> i don't think exxon thinks that way from the years i have been there. they think there is a fundamental demand for energy. they will look for the higher return projects. hurdle to set a for these investment but the hurdle rates will not be based on a bond rate. they will be based on what they think the shareholder rate of return is expected and then exceeding that expectation. the price of oil is putting deflationary pressures, where does the euro go from

here? it bringss a brexit the euro down? from got the hint of qe mario draghi. were has been a big move but could get further weakening of the euro relative to the dollar. we expect mario draghi to notnd qe but probably anything like the 25% move. most of the move in the euro versus the dollar, we have already seen. francine: what happens to the pound? it's impossible to predict the referendum. how do you position yourself as an investor? >> as we got the news of horace johnson revealing his opposition, that hurt the pound. going into the referendum in june, the pressure on the pound will be to weaken.

if the out come is a decision probablyexit, there'll be a nice little pop. tom: alan greenspan will be 90 in a few days. seen the chairman so cautious on the american experiment. white as chairman greenspan have caution as america moves forward? u.s. has really tightened the global outlook. i think him being a student of history recognizes that the slowdown in product to the tape is absolutely critical. if this persists for 10 or 20 years, it has enormous implications. is the idea that you

have to have a shock to pick it up. where's the shock to pick up our productivity? >> medium-term, many people would argue that low global oil prices are a net positive for productivity long-term. high oil prices were a negative in the 70 so there will be delayed and if it's of that in future years. talking about alan greenspan, we have not enjoyed the benefit of the low oil price on world growth. if the oil price goes down by $10, gdp in europe goes up. >> we have been surprised. this time is different. normally, the positive side of falling oil prices happens sooner. what we have seen so far it this cuts,s that the capital

that pain was felt immediately. it took us on till maybe the second half of 2015 before we saw the grassroots of the consumer than a fitting or spending the benefits. tom: thank you so much for joining us today. the shock and all, never a boring moment with herbalife it becomes tangible this morning. raimy will join us on the back and forth personified right bill ackman. this morning consolidated by big doubt on accounting. ♪

tom: jobs day tomorrow and the fourex report. the euro is churning and the yen is churning. we got a weaker yen over the last number of days. francine goes home tomorrow. the hydrocarbon currency is doing pretty good. the russian ruble is stronger as well. isncine: coming up shortly

"bloomberg ." david, you have many great guess but you also have ray dalio, the best. david: he is the iconic head of bridgewater and will be with us for an extended discussion. joining us live, we have the ceo of adidas and the new york times company and the head of ever core. we'll talk about the turbulent financial markets. that's all coming up. francine: thank you so much. we could talk about it all day. let's go to that chart on herbalife. here is herbalife back 10 years ago. you have the move up and this is perfectly describing bill ackman and the soap opera and the back

and forth. i never even tasted the stuff . in terms of scope and scale, we have only come back to a 56, right now, 48-51 is the early bid ask. we have pulled back into a mid range without these crises moments. what is the headline? is a metricere called active new members, the amount of people that by your vitamins or protein shakes. they say they overstated this because of database errors. the discrepancy that we found out about today is huge. new members worldwide increased 3.2% instead of the 16.7% they said 1.5 weeks ago. in the u.s., they only increased right 30% instead of the 71% they had said. tom: we are trying to avoid

speculation. it's the basic idea that the good, term nostalgia is a consolidated set of financial statements audited by price waterhouse coopers. then we get into doubt about earnings and revenues but also about the unit count issue. francine: we cannot speculate but we may hear from bill ackman. it may embolden him who is shorting the company who has been saying in the past that they are an illegal pyramid scheme. begins in 2015, the first quarter. to 27.1% from 28% down which is not a big deal. quarters see it is 2 on from that where they report 15 up 1% versus a

reported up 33%. if i look at tyco when other adjustments, i'm not suggesting they are like that but this is the first moment where we have seen the company begin to adjust to what the critics have always talked about. this is a metric they put in place because they change their marketing practices so it's been in place for one year. they are blaming it on the database. -- ifetric means it's stated correctly, gives you how much they will grow in the future. tom: maybe governor romney will bring this up today when he talks about the republican party. herbalife with mysterious headlines and they make clear it affected their most recent conference call. let's give you a day to check

-- a data check. i think this says it all. we have really constructive equity markets over the last couple of days and brent crude is at $37. francine: european stocks are down from 0.3%. they have been gaining for three days in a row and they are looking at the specter of brexit. also had u.k. services index plunging to the lowest in three years. there is angst among the voters. this could potentially be huge. we don't know the implications of brexit but it could be a

shock to the system. on bloomberg television, "bloomberg " will continue and they will bring you up-to-date on herbalife. it's down 13%. matus will give us market economics on the job economy and the controversy of robert gordon of northwestern university. we will move on to bloomberg radio in the 8:00 hour area alan krueger will join us from princeton and bill gross will onn us after the jobs data the fixed income markets. ♪

>> europe's stock rally runs out of steam as investors wait for new data on the strength of the u.s. economy. energy tycoon killed just one day after his indictment on charges of oil and gas rigging.

adidas forecast sales may rise at the fastest pace in five years. we talk to the c.e.o. live. >> david: welcome to the show. stephanie: we're having a big morning and happy to have you about the hour, roger altman. i know we have so much to cover. i am so focused on heralife this morning, restating their growth numbers. this is a wow. we've already seen them move in the premarket. >> coming from london, it doesn't excite me. here's what excites me, when i see a number like this, third quarter 2015 reported up .8% versus a reported 33%. that's a discrepancy. stephanie: t